Earlier this year, the United States Court of Appeals for the Eleventh Circuit (“the 11th Circuit”) in the case of Houston v. Publix Super Markets, Inc. held that a district court did not err by admitting evidence at trial concerning payments made by a litigation funding company to the plaintiff’s treating doctors because the evidence was relevant to show bias on the part of the doctors who testified in the case.
In 2012, the plaintiff, Robin Houston, was shopping at a Publix Supermarket in Georgia when she slipped and fell on liquid that had been left in the aisle. As a result of her fall, Houston sustained serious injuries. She filed suit against Publix Supermarkets, Inc. (“Publix”) and Publix removed the case to federal court based on diversity jurisdiction. During litigation, Publix conducted discovery regarding the relationship between Houston, her treating doctors and a third party, ML Healthcare. ML Healthcare is a “litigation investment” company that contracts with doctors to provide medical care for injured people with viable tort claims who lack medical insurance. ML Healthcare enters into contracts whereby it purchases at a discounted rate from doctors the medical debt that putative plaintiffs incur during their treatment. However, the contract also allows ML Healthcare the right to later recover the full amount of the medical care provided out of any personal injury settlement or judgment. ML Healthcare had entered into such a contract with Houston and the treating doctors who testified at her trial regarding the cause and extent of her injuries. At trial, the district court held that Publix was entitled to present evidence of the relationship between Houston, her doctors and M.L Healthcare in order to show that Houston’s doctors were biased in their testimony and that Houston’s medical expenses were unreasonable. After an eight-day trial, the jury returned a verdict in favor of Publix. Houston appealed.
The 11th Circuit in its analysis reiterated the well-established principle that under the collateral source rule, a plaintiff generally can retain money or services received in reparation of an injury or damage from a source other than the tortfeasor. Evidence of collateral benefits is inadmissible if it is offered to reduce damages. The rationale behind this prohibition is that because damages already paid by a collateral source do not serve to reduce the amount of damages that can be claimed, evidence of such payments is not relevant to any matter at issue. However, evidence of collateral source payments may be admissible if it is relevant for another purpose. In such cases, however, the trial court should instruct the jury about the limited purpose of the evidence and remind the jury not to consider the collateral source payments to reduce its award of reasonable and necessary medical expenses. The district court held that the business model used by ML Healthcare which included the fronting of medical expenses was “highly relevant and probative” as to bias of the doctors that it paid as well as to the reasonableness of the fees charged.
In federal diversity actions, state law governs substantive issues but federal law governs procedural issues. Although Georgia’s collateral source rule is a substantive rule of damages, it also had procedural evidentiary implications. The Court looked to an Alabama case it had previously decided to resolve the choice of law implications. In Plumb Tools, a Division of O’Ames Corporation, 696 F.2d 1321 (11th Cir. 1983), the plaintiff was injured when a shard of metal flew off a hammer while he was at work. He sued the manufacturer of the hammer. During the federal litigation, the plaintiff’s workmen’s compensation carrier sought to intervene in the action to recover the money it had paid the plaintiff for his resulting disability. Alabama law permitted that intervention so long as the court imposed limitations on the participation. However, the federal district court imposed no conditions whatsoever. The 11th Circuit reversed. In so doing, it held that Alabama’s collateral source rule was a substantive law, a procedural ruling allowing intervention would undermine this substantive law. “Ergo, any mention of the plaintiff’s prior receipt of compensation for her injuries would violate this substantive state law, transforming the procedural ruling that essentially revealed this compensation into a ruling that ran afoul of Alabama’s substantive law.” However, Georgia’s collateral source rule is not “all-or-nothing” as is Alabama’s. Instead, Georgia recognizes instances where evidence of collateral source payments are admissible. Accordingly, in this case, federal law controlled. Notably, the Houston decision mentions in a footnote that recent legislative changes in Alabama now permit the introduction of evidence that a plaintiff’s medical bills have been paid.
The 11th Circuit ultimately concluded the evidence of ML Healthcare’s payment arrangements was relevant because it could be used to show bias on the part of the doctors who testified. The Court also ruled the fact that this evidence also implicates the collateral source rule does not render it irrelevant for impeachment purposes. The Court further stated any potential for prejudice arising from the admission of the ML Healthcare evidence could be mitigated by the explanation that Houston remained fully liable for the full value of medical care provided regardless of any damages received.
The extent to which this federal court decision would be found persuasive to Alabama state courts is open to some debate. But the reasoning of the decision certainly supports an argument for the admission of evidence a medical professional may be motivated by bias or interest in their testimony as to the reasonableness and necessity of a plaintiff’s claimed medical expenses.